“As the largest minimill steelmaker in the U.S., Nucor Corp. (NUE 41.29 NYSE – yield 3.50%) does have exposure to highly cyclical markets, such as construction and automotive. Minimills by nature, however, are more efficient and use scrap metal as an input, so Nucor’s operations are actually less cyclical than many of its competitors. The company’s highly flexible production process also allows for almost instantaneous adjustment of output to match market demand. Nucor stands to benefit from a growth strategy that involves four initiatives: optimizing existing operations; making strategic acquisitions; constructing new plants and developing new technologies for markets where a major cost advantage exists; and expanding globally through joint ventures. Conservatively run and maintaining one of the highest return-on-equity ratios in the industry, Nucor is also unique in that its debt-to-capital ratio is one of the lowest in the industry. Too, the company has a solid share of the markets in which it competes and an extremely diverse product mix. While the near-term remains uncertain due to the tenuous economic recovery and the risk of overseas producers flooding the market, we like Nucor for portfolio diversification and income production, given its 3.8% yield.”
John Buckingham, The Prudent Speculator, 12/2/10
